Discussion:Shareholder Basis - S-corp
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| 26 January 2007 | |
| What is shareholders basis in stock upon dissolution?
Company started in 2003 as franchisees of 2 stores. Franchisor lent $500k and there were assets of $410 for depreciation. In 2003 there was a loss of $70K and draws to shareholder of $43K. Losses were suspended on 1040. In 2004 there was a loss of $60k and draws of $25K, losses were suspended on 1040. In 2005 one of the stores was sold. Ordinary income of $26K and loss on sale of $140K and income from forgiveness of debt of $245K. This was enough to use the suspended losses. In 2006 the other store was sold. Ordinary loss of $42K, net gain from sale of assets and forgivness of debt was $154K. Net draw of $8k. The shareholder is assuming $151K of the debt to the franchisor. The computer showed stock basis at 1/106 of $9k. I am confused as to how to figure the basis in the stock and if there is a c/g or c/l upon dissolution. If the corp took gain on forgv. of debt of $151K. How does that effect shareholders basis as he assumes that debt. I would assume that since his basis goes up thru income on the corp K-1, he does not add it on again to basis individually. I appreciate your help. Thanks | |
| 26 January 2007 | |
| what did the shareholder put in, what did the shareholder take out, what were the separately stated and what were the non-separately stated items of all K-1s? | |
| 26 January 2007 | |
| The shareholder didnt put anything in. He made draws in 2003 43k, 2004 25k, 2005 2k and 2006 7k.
Are you implying that his basis is the 151,000 less his previous draws? What do you mean by separately stated? All the income, gains, losses were included on the K-1 and flowed to 1040 when not suspended in 2003 and 2004 Thanks | |
| 26 January 2007 | |
| You should do a worksheet to determine the shareholder's basis. Do you belong to any organizations providing helpful worksheets? | |
| 26 January 2007 | |
| The only worksheet I have comes with tax program, and I does not seem to make total sense. Thanks | |
| 26 January 2007 | |
| If it don't make sense, it is time to switch programs or do it manually. | |
| 26 January 2007 | |
| ha ha ha, agreed, Pegoo. What good is the software if you don't know if the answer is right? We should rely on software only to calculate, we should already have an idea as to how it is going to come out. Which is why HL says "this doesn't seem right".
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| 26 January 2007 | |
| Hlcpa, the $151,000 debt assumption by a shareholder does not represent taxable income to the corporation. Instead, it is a non-taxable contribution to capital which increases the shareholder's basis in his stock. | |
